Vietnam

consumer
trends 2019

1
Vinamilk woes – what constrains growth in consumer goods

Vinamilk lacks growth in a saturated

category.

Yet per capita consumption is ½ of

ASEAN neighbours and is 1/3 of
European levels.

So plausibly under priced?

2
Constraints

1. Decelerating birth rate, under 12s and pester power.

2. Rural the next growth frontier….population is in long term decline.
3. Consumer naivety is over, brands face rapid claim wear out.
4. Food safety challenges trust and force consumers to be smarter.
5. Convenience stores ease market access.
6. The choice paradox is now overwhelmingly counter productive.
7. Brands have forgotten how to innovate.
8. Experiences over tangible goods, shift purchase priorities.
9. More data yet less informed. Massive media fraud.

3
Decelerating birth rates, under 12s and pester power

1,425,000 births in 2018. The Age profile in 000s

60,000
fifth year of decline. Silver is golden going forward
50,000

40,000
The demographic that drives 36,484
much of mums purchase 30,000
21,641
14,567
behaviour has commenced a 20,000
slow decline.
10,000 17,976 18,004 14,557
-
The birth rate has declined
from 75 in 2008 to 59 in 2018 0-12 years 50+ years
(rate per 000 females 15 to
49).

There will be 241,000 less

births in 2028 than in 2018.

Source: GSO, Global Demographics, Cimigo 4

Rural the next growth frontier….population is in a long term decline

The rural population Rural versus urban profile in 000s

120,000
commenced a decline in Increasingly urban
2017. 100,000

80,000 54,888

35% urban in 2018 to 60,000 60,579

60,328
43% in 2036. 40,000

20,000 47,257
24,794 33,156
Expect declining rates of -
return on rural portfolio
and distribution efforts. Urban Rural

Yet erratic agricultural

incomes shift to stable
manufacturing incomes.

Source: GSO, Global Demographics, Cimigo 5

Consumer naivety is over, brands face rapid claim wear out

20 years of mostly double digit 40%

growth and no successful
35%
innovative propositions to Share of ready to drink milk
address the cliff edge. 30% volume % by age
25% 34%
Brands using out date playbook
to market evolutions of former 20% Missed opportunity
fortification concepts. 24%
15%

Consumers have heard it all 10%

17%
before.
5%
8% 9%
4% 3%
Advertising budgets have 0%
shifted to low CPM online 6-12 13-19 20-24 25-29 30-34 35-39 40-45
formats, away from strategic
brand building.

Source: Cimigo beverage panel 6

Food safety challenges trust and force consumers to be smarter

Source: https://tuoitrenews.vn/news/society/20171114/vietnamese-killing-themselves-with-dirty-food/42650.html 7
Yet to be profitable, not so convenient, convenience stores ease market access

Blame (at least in part) the yet Grocery retail sales contribution %
to be profitable not so and # of modern self service stores

convenient, convenience 100%

0.4% 0.7% 1.1% 1.9% 3,177 3,501
stores. 90% 17% 17% 18% 19% 3,001
80%
70% 2,700 2,501
60%
They provide ready access for 50%
2,100 2,001
1,800
a listing fee. 40% 83% 82% 81% 79%
1,501
30% 1,001
20%
501
10%
Market entry and testing has 0% 1
become viable through 2015 2016 2017 2018

modern and online channels Tradtional Trade Modern Trade E-Commerce Modern self service

delivering 21% of retail sales.

All without the sales and Bach Hoa Xanh account for 46% of additional modern self service outlets in 2018 with 218 new outlets.
distribution investment
required to service the
traditional trade.

Source: GSO, Cimigo 8

 The fight
for share of throat
Water RTD milk Fizzy soft Energy
69 : 81 32 : 39 14 :15 9 : 16
Year 2004 : 2018

Brands 205 : 348

Packaged (NA) beverages
This is just brands.
RTD coffee Drinking yoghurt
Tea Malt
RTD milk alone had 1:8 13 : 18
16 : 52 2:2
74 variants in 2018

Choice paradox
overwhelmingly counter productive

Powdered milk formula Nut milk Soy milk Sports

32 : 39 3 : 14 7 : 13 0:9

Source: Cimigo beverage panel

Brands have forgotten how to innovate
Consumer product categories are saturated and
have matured.

Brands product evolutions lack innovation.

Emergence of store and platform own brands.

More modern retailers, shopping platforms, media
channels, fragmentation means... all requires more
work.

Greater sophistication and hence consumer

segmentation.

Greater fragmentation.

10
Experiences over tangible goods - shift purchase priorities

THEN (and 45+) NOW (and 20+)

Long-term planning, Looking to enjoy life NOW,

work hard before less focus on delaying
enjoying, thinking about gratification
the future

Income is spent on
Income is spent on experiences that create
gathering assets, memories, they “make-do”
possessions and savings with possessions

Narrower definition of Broader definition of

“success” – being wealthy, “Success” – being happy, self
many possessions & fulfilment, recognition in social
property, high-level title media

Source: Cimigo 11
Experiences over tangible goods - shift purchase priorities

Experiences and achievements are more important

than tangible goods.

Reinforced by 64 million Facebook users.

Education: US$881 million spent by 24,325

students in US on education.

A further 72,354 students went to Japan in 2018.

27,061 to S Korea.

20%+ growth over 2017, reaching 33 million

international passengers.

Just over 1 million Vietnamese tourists visited

Thailand in 2018.

Source: Cimigo, Open Door, JASSO, National Institute for International Education, VCSC, Ministry of Tourism and Sports 12
More data yet less informed

More hype, more fools. More marketing

illusions.

The marketing budget pendulum has swung

to far away from brand building efforts to
tactical online garbage.

Online CPM race to the bottom of a very dark

pit. Massive ad tech fraud. Slow awakening
from marketers.

Tide begins to turn on people farming.

13
Constraints on consumer goods growth

Less kids Failure to innovate Rural decline

beyond 12 years Experience shift

Sales Brand build

activation

Shattered trust Market access Choice paradox

76 milk brand variants

14
Part New image

Vietnam
unleashed
Vietnam consumer trends 2019

15
93.7 million US$240 billion US$2,560 Internet economy Retail sales 72 million 64.4 million
GDP 7.1% growth GDP/capita US$9 billion US$145 billion users users
3.8% of GDP 12% growth

What drives Vietnam’s phenomenal success?

67% internet 85% smartphone US$2.89 billion 605 new cars 88,000 new 45% banked
National National All advertising per day Apartments National
All Adults 15+ HCMC, HN, DN Adults 18+

Source: 2018 data points. GSO, Global Demographics, Cimigo surveys, VAMA, Savills, Kantar Media, Asia Media Partners 16
Unleashed

1. Rapid urbanisation demands ultra convenience.

2. Most interconnected trading nation globally.
3. Increasing intra Asia trade and investment.
4. More women work in Vietnam than anywhere else in region. Entrepreneurial spirit and
multiple income sources.
5. Middle class acceleration.
6. Internet economy shifts consumer priorities. Internet economy at US$9 billion.
7. Online shopping will surpass modern trade share of sales in 2028.
8. Keeping up with the Nguyen’s with consumer finance.
9. Speed of change – opportunities to leap frog abound.

17
Fevered nationalists

18
Rapid urbanisation demands ultra convenience

Stressed infrastructure.
Rural versus urban profile in 000s
120,000
Increasingly urban
Changing living 100,000

conditions. 80,000 54,888

60,000 60,579
60,328
Rise in convenience 40,000
outlets. 47,257
20,000
24,794 33,156
-
Rise in online shopping.
Urban Rural
Rise in delivery and ride
services.

Source: GSO, Global Demographics, Cimigo 19

Most interconnected trading nation globally
Free trade agreements abound.

Interconnected global trade is

defined as imports plus exports
as a % of GDP.

Vietnam is at 200%.

Thailand as 122%

China 38%.

India 41%.

Source: GSO, World Bank, Weforum.org 20

Increasing intra Asia trade and investment

50% of trade is now intra Asia.

79% of FDI from within Asia led by Japan,

Korea, Singapore, Hong Kong and China.

US China trade tensions push strong FDI

investments in manufacturing. Many had
moved ahead of TPP outcome.

2019 minimum wages in Saigon at US$181,

just 57% of the minimum in Guangzhou at
US$320.

Vietnam has moved beyond the “1” in the

‘China plus 1’ approach. Manufacturing
accounts for 47% of foreign direct
investments.

Source: FIA (MPI), GSO, Cimigo, Guangzhou Provincial Government 21

More women work in Vietnam than anywhere else in region

This desire to get ahead, work hard

and the informal economy helps
explain the rise in the middle class. Working population
at 58% of total in 2018.
Highest % working population in Up from 50% in 2004.
region. It significantly lowers
dependency ratios. This gives GDP a
huge boost.

40% of SMEs owned by women.

Entrepreneurial spirit many aspire to

work for themselves. 131,275 new 88% of women 96% of men
business registrations in 2018.
(20-64 years) (20-64 years)
work. work
Urban working adults have on
average 1.67 sources of income.

Independent retailers on Facebook

make up 2nd largest source of online
sales (more than Lazada, less than Dependents per
Shopee shopping platforms).
employed
person at only 0.7

Source: GSO, Global Demographics, Cimigo 22

Middle class acceleration
Tipping point of middle class now surpassed with 50% of all households with income above US$400 per
month. Today there are 11,785,266 middle class households.

Economic class distribution

10,000,000
23,371,408 households 38% 45%

9,000,000 40%

8,000,000
35%

7,000,000
30%
25%
6,000,000
6,385,624 25%
5,000,000 18%
20%
4,000,000 3,594,694
11% 15%
3,000,000 2,209,610
8%
10%
2,000,000
800,798 1,838,870
1,000,000 2,182,202 2,593,569 5%
1,958,040
1,039,923 768,080
- 0%
A: US$850 and above B: US$600 to below 850 C: US$400 to below 600 D: US$175 to below 400 E: Below US$175

Total Urban Households Total Rural Households % of Households

Source: GSO, Cimigo 23

Internet economy shifts consumer priorities

Internet, mobile & social New business models and Aggressive financing
media the sharing economy
Easier to gain access to promotions,
Causing the most Democratising access to discounts and loans – making
fundamental change in goods and services previously purchases more “affordable”
people’s lifestyles and only available to a limited
behaviours. segment

24
Internet economy at US$9 billion

Internet economy 39% 31% 24% 6%

US$9 billion Online travel Online Ads, media, Ride hailing
3.8% of GDP shopping games

US$3 billon in 2015 and

1.7% of GDP.

Source: GSO, Temasek, Google, Cimigo 25

Online shopping will surpass modern trade share of sales in 2028

Despite off the rise in yet

Retail sales contribution %
to be profitable, not so and # of modern self service stores
convenient, convenience 0.7% 1.1% 1.9%
100%
0.4% 3,177 3,501
stores. 90% 17% 17% 18% 19% 3,001
80%
70% 2,700 2,501
Modern trades 60%
50%
2,100 2,001
contribution to retail sales 83% 1,800 1,501
40% 82% 81% 79%
has moved from 15% in 30% 1,001
2005 to 19% in 2018. 20%
501
10%
0% 1
2015 2016 2017 2018
E-commerce has reached Tradtional Trade Modern Trade E-Commerce Modern self service
a tipping point with
consumer trust now
granted. The 60%
incidence in metropolitan
cities suggests growth is
set to explode.

Source: GSO, Temasek, Google, Cimigo 26

Keeping up with the Nguyen’s with consumer finance

Smaller household size

changes priorities.
US$51 billion
Less older dependents in
the 250,000 apartments 21% of GDP
sold in the last 4 years.

35% of retail sales

Lower birth rate see less
pester power.

Source: MoF, Stoxplus and Biinform 27

Speed of change – opportunities to leap frog abound
Almond milk took years of vegetarian
attitudes and diets to develop, before
veganism evolved.

In Vietnam. Skipped!

The speed of change today enables

Vietnam to leapfrog the adoption curve
of developed markets.

▪ Telephone to internet.
▪ ATM to mobile banking app.
▪ Traditional to online shopping.
▪ Own to shared rides.
▪ Fresh produce stays fresh.
▪ Milk to not milk.

28
Constraints
1. Decelerating birth rate, under 12s and pester
power.
2. Rural the next growth frontier….population is in
long term decline.
3. Consumer naivety is over, brands face rapid claim
wear out.
4. Food safety challenges trust and force consumers
to be smarter.
5. Convenience stores ease market access.
6. The choice paradox is now overwhelmingly counter
productive.
7. Brands have forgotten how to innovate.
8. Experiences over tangible goods, shift purchase
priorities.
9. More data yet less informed. Massive media fraud.
Unleashed
1. Rapid urbanisation demands ultra
convenience.
2. Most interconnected trading nation globally.
3. Increasing intra Asia trade and investment.
4. More women work in Vietnam than anywhere
else in region. Entrepreneurial spirit and
multiple income sources.
5. Middle class acceleration.
6. Internet economy shifts consumer priorities.
Internet economy at US$9 billion.
7. Online shopping will surpass modern trade
share of sales in 2028.
8. Keeping up with the Nguyen’s with consumer
finance.
9. Speed of change – opportunities to leap frog
abound. Identifying fads versus trends.
29
Delivering your competitive advantage

30
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31
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32
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Cimigo is the leading independent data collection agency in Vietnam. Cimigo has interviewed 950,000
consumers, 700,000 retailers and 30,000 healthcare professionals in the past 24 months. Let us bring
our unrivalled resources to bear on your projects in Vietnam.

33
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35
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